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MTRS policy on furloughs and similar measures

On April 30, 2010, the Massachusetts Teachers' Retirement Board adopted its Policy on Furloughs and other Fiscal Emergency Measures for School Years 2009-10 and 2010-11 (see below).

On June 30, 2011, that policy expired, and as of July 1, 2011, the MTRS began applying G.L. c. 32, §§ 4(1)(c) and 5(3)(b):

Chapter 32, § 4(1)(c) allows the MTRS to recognize creditable service for any "period of ... continuous absence without regular compensation" up to one month.

Chapter 32, § 5(3)(b) provides that any "leave or period of absence" occurring within the three-year period used for the member's final average salary will be included in that period and, if unpaid, the "rate in effect for him immediately preceding any period of his absence" shall be used.

These two provisions allow members to have temporary (up to one month) unpaid leaves of absence from work without affecting their retirement calculation. The same two sections allow for service credit and imputed salary for members who are absent from work due to furloughs. This assumes the "furlough" is a temporary (less than one month) period of unpaid leave of absence from required work days. These two sections cannot be used if there is no absence, thus they are not applicable if a district implements a salary reduction or a reduction of the contractual work year.

Service credit for a furlough: In order for a MTRS member not to lose creditable service for a "furlough," the member must be placed on an authorized unpaid leave during the period of the furlough, not to exceed one month.

The member's last salary rate applies during the furlough: If a furlough day is a period of authorized unpaid leave, the MTRS will use the salary rate in effect immediately preceding the furlough when determining the salary average for any member who has a furlough within his highest three or last three years.

Please note: "Furloughs" that do not meet the statutory requirements include plans that reduce the number of work days by implementing "volunteer" days during which teachers work but do not get paid or when a district reduces the school year itself. These types of plans will negatively impact a MTRS member's creditable service and salary average.

If you would like an opinion as to whether your district's particular cost-saving measure will impact the retirement calculation of your MTRS members, please mail, e-mail, or fax us a copy of the relevant contract language.

Policy on Furloughs and other Fiscal Emergency Measures for School Years 2009-10 and 2010-11, and thereafter

Adopted by the Board on April 30, 2010

Chapter 32, section 4(1)(c) allows the System to recognize creditable service for any “period of … continuous absence without regular compensation” up to one month (emphasis added). Chapter 32, section 5(3)(b) provides that any “leave or period of absence” (emphasis added) occurring within the three-year period used for the member’s final average salary will be included in that period and, if unpaid, the “rate in effect for him immediately preceding any period of his absence” shall be used.The System has used these two provisions to allow members to experience temporary (up to one month) unpaid absences from work without affecting their retirement calculation, even when those absences occur during the “final three years.” Recently, staff have used these provisions to “fill in the gaps” on both service and salary for members who missed work due to weather emergencies.

The same two sections can be used to supply credit and imputed salary for members who are absent from work due to furloughs. This assumes the “furlough” is a temporary (less than one month) period of unpaid leave, or absence, from work. (These two sections cannot be used if there is no absence, thus they are not helpful if a district merely implements a salary reduction.)

School districts have implemented cost-saving measures that are structured in different ways, though they often call them “furloughs.” Some of these measures reduce the number of work days in such a way that it is difficult to consider them “absences” since there is no work day during which employees are absent. For example, some districts have reduced the school year itself, or have implemented “volunteer” days during which teachers work but do not get paid. These measures are substantively identical to furloughs and accomplish the same result, but do not fit within the literal terms of the statute.

Findings

To avoid different results based solely on the form, rather than the substance, of cost-saving measures during the present fiscal crisis, the Massachusetts Teachers’ Retirement Board finds as follows:

The Commonwealth and local school districts are experiencing a fiscal crisis that is requiring many school districts to reduce budgets substantially.

This fiscal crisis is likely to last at least through the end of the next fiscal year (ending June 30, 2011).

School districts are implementing cost-saving measures, including furloughs (i.e., periods of absence from work without pay).

Many cost-saving measures, including furloughs, involve a reduction in the required number of work days. Some are structured in such a way, however, that an employee is not absent on a regular work day (e.g., a reduction in the school year itself reduces the required number of work days, but does not involve absences). The TRS can impute creditable service and salary for days of absence, but not for cost-saving measures that do not involve an absence during work days.

“Volunteer” days, during which teachers work but do not get paid, are not considered “required” work days. Thus, a school year schedule that is reduced by some number of “volunteer” days is considered to have a reduction in the required number of work days.

The TRS was unable to give meaningful guidance to all school districts as to which types of cost-saving measures would fully preserve members’ service and salary, and which would not, before the cost-saving measures were adopted for school years 2009-2010 and 2010-2011.

Given the inability to provide meaningful guidance during the current fiscal year, the Teachers’ Retirement System desires to treat uniformly all cost-saving measures implemented for the 2009-10 or 2010-11 school years that involve a reduction in the required number of work days.

Policy

Thus, the Teachers’ Retirement Board directs staff to treat all cost-saving measures for school year 2009-2010 or 2010-2011 that involve a reduction in the required number of work days for any class of employees, including but not limited to furloughs, as a “period of absence,” and to implement sections 4(1)(c) and 5(3)(b) as appropriate. For this period, a “period of absence” is a reduction in the number of required work days, not a reduction in duties and/or pay.

For School Years 2011-12 and beyond

Beginning in July 2011, the TRS will apply sections 4(1)(c) and 5(3)(b) strictly according to its terms, as reflected in more detail in our broadcast e-mail of April 25, 2011
to employers.